Landmark decision on redundancy pay for construction casuals

Posted on: 29 Apr, 2013 |
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Construction employers will be heaving a sigh of relief
following last week's decision by the Full Bench of the Fair Work
Commission (Commission), overturning an earlier
ruling that entitled construction casuals to redundancy pay.

The Fair Work Act 2009 (Cth) (Act)
provides that redundancy pay is generally not payable to casual
employees. However, following the end of a construction project,
the CFMEU notified a dispute in the Commission seeking a ruling on
whether 'long term casuals' were entitled to redundancy pay under a
relevant enterprise agreement.

In the case before the Commission, the relevant workers had been
engaged to work on a construction site as 'casual employees' by a
labour-hire company. Although they were paid as casuals, they were
required to work regular and systematic hours for a period of more
than 12 months. At the end of the project, the workers were
dismissed and were not given a redundancy payment.

Despite the enterprise agreement containing a casual loading
clause, which by its express terms was to compensate casual workers
for employee entitlements including redundancy pay, the Commission
found that the workers were not casual employees according to the
common law definition and were entitled to redundancy pay.

On appeal, the Full Bench said it was erroneous to proceed on
the assumption that the National Employment Standards
(NES) referred to the notion of casual employment
under the common law. The Full Bench considered that none of the
modern awards take the common law approach of excluding an employee
with regular and systematic employment from the definition of
casual. It held that the definition of a casual employee throughout
the Act would take its meaning from the relevant federal
instrument, according to the Act's hierarchy. That is, the meaning
would either come from an applicable enterprise agreement, or if
there was no such agreement in place, from the modern award that
covered the employee's employment.

For employers:

The Commission's ruling makes clear that the meaning of a
'casual employee' should be drawn from the relevant enterprise
agreement or modern award, not the common law.

Although there are some entitlements for a casual who has been
employed regularly for at least 12 months and who expects to keep
working, construction and labour-hire companies that employ casual
workers will generally not be required to pay redundancy. It will
be critical that:

the employment terms and conditions contained in enterprise
agreements, awards and contracts specify that casuals are paid a
loading in compensation for not being entitled to redundancy pay,
among other things;

the employee is 'engaged' as a casual (meaning the label of
'casual' is applied at the time of the employee's engagement);
and

the employee is paid as a casual (specifically, the employee
must be paid a casual loading as compensation for the range of
entitlements that are paid to permanent employees but not to
casuals; ie redundancy benefits and paid leave).